From BrazilOil – From Brazil

Rio wants their oil money

frombrazil — Fri, 30 Nov 2012 15:42:29 +0000

Rio’s politicians mounted a cleverly-staged piece of political street theatre last week, in order to drive home the message that the state’s residents wants to keep oil royalties for themselves. It worked.

By Dom Phillips

According to police, some 200,000 people turned up to Sérgio Cabral’s demonstration on Monday in opposition to a new bill that would mean Rio gets less money from oil royalties. And the Rio de Janeiro state governor kept them all waiting.

200,000 is a lot of people – an explosion of popular support, you might think. But though Cabral and Mayor Eduardo Paes to enjoy popular support, this was more a cleverly-staged piece of political street theatre, paid for and organized by the state, its numbers swelled by public employees from cities in Rio state whose budgets would have been affected.

A couple of city employees from Rio das Ostras in the omnipresent demonstration T-shirts told me they were getting their usual salaries for the day and that the mayor had provided three busses. “This is work,” shrugged one.

Both Rio de Janeiro and Espirito Santo states earn good money from the oil produced in them and off their coasts – the rest of Brazil’s states want a share of that. It’s a stand-off that’s been going on for a year. This was the third such demonstration in Rio.

Politically, the situation is becoming urgent: in September the government announced long-delayed bidding rounds on new oil concessions for May and November next year – and it needs the oil royalties law passed to do that.

In November Congress finally passed a bill that’s been around a year – but in it, both states will lose money: in Rio’s case, it says, R$3.4 billion in 2013 alone, R477 billion by 2020. They wanted President Dilma Rousseff to veto part of the bill so they’d at least keep getting money on existing contracts. Consequently the demonstration was called: Veta Dilma, or ‘veto it, Dilma’.

Official billboards covered Rio in the days before the demonstration. There were even special free-standing posters at metro stations. The whole shebang was lined up around four sound trucks by 2pm Thursday – much like a carnival, just lacking fancy dress, beer sellers, and that all-important carnival atmosphere. Difficult to stoke up on a drizzly workday Monday, no matter how much shouting you do. Instead it felt more like a strike, as organizers sent squads of protestors in matching T-shirts to their spots.

The anti-royalties carnival did not start rolling until 4.30pm or so, by which time we’d been bombarded with ear-splitting pop and unidentified voices trying to get us to shout “Veto it, Dilma!” for a couple of hours. As Cabral, mayor Eduardo Paes, Espirito Santo governor Renato Casagrande, who were wearing pro-demo T-shirts, and actress Fernanda Montengro, who had a jacket over hers, walking behind a giant hand-held banner, it rumbled off.

In front of the politicians, themselves in front of 200,000 people, was a moving, cordoned off area for press. Within this, a truck with an upper level for photographers to get the scale of the event. But this was not an easy caravan to coordinate, so at times the truck of photographers stopped and the rest didn’t, leaving the press sandwiched between.

Then a group of Brazilian Indians, currently squatting the disused Indian Museum which is to be knocked down because it’s next to the by the Maracanã World Cup stadium and they want to build a car-park or something, crashed into one side of this enormous crocodile of people.

The politicians and Ms Montengro, press, carrying their cameras and bags, and security, all shoving, smiling and shouting, were suddenly rushing backwards and forwards, diverted away from the main march and hustled into the town hall.

Later on, Cabral and Casagrande did a crowded press conference – and the Rio governor had backed down on his previous threats to cancel the Olympics and World Cup, focusing on the veto. The crowd was entertained by Brazilian musicians and singers. Everybody got a day off. There were no speeches, just the reading of a ‘manifesto’. It looked great on television: no damp atmosphere, just colour and crowds.

The president announced Friday she is vetoing just those parts of the bill that Rio wanted: the state will keep getting the revenues it’s been getting from existing contracts. 100% of future royalties will be invested in education, the government said. Cabral’s political street theatre has had its pay-off. The State of Rio de Janeiro thanks president Dilma, it said in a statement.

Photo by Dom Phillips

Everything golden again for Brazil’s richest man

Vincent Bevins — Wed, 28 Mar 2012 20:58:12 +0000

Things are looking a lot better for Eike Batista. Last week the world’s 8th-richest man was still helping defend his son, Thor, against charges he was at fault in a car accident that claimed the life of a cyclist.

Neither Thor nor Eike denied that the 20-year old’s Mercedes-Benz SLR McLaren struck 30-year old Wanderson Pereira da Silva at high speed, killing him instantly. But both took to social networks to proclaim Thor was not at fault.

Now, it looks like the heir-apparent to the $30bn empire will not face any criminal charges, and that empire has just gotten a very welcome cash injection from a friendly sheikh in the Gulf. Mubadala, an investment arm of the Abu Dhabi government, will drop $2bn into EBX, Eike Batista’s group.

Mr. Batista has gotten very, very rich off of publicly floated plans to develop Brazil’s oil, gas and mineral resources, and has recently expanded into hospitality, real estate, technology, and beauty companies.

But so far, few of his businesses have actually made any real profits. This makes the new deal especially important for him.

As the FT’s Beyondbrics reports:

Mubadala’s $2bn investment in the EBX holding company itself is a big vote of confidence. As Batista said himself in an interview with beyondbrics, “it brings branding by a strategic investor who is internationally known”. But more importantly, it means Batista can choose to spread the cash across his various businesses without losing any operational control.

Batista is quite a character. His father was head of Vale, Brazil’s most important mining company. After Eike made his own billions, he has often surprised the foreign correspondents who interview him by showing off the Mercedes he keeps parked in his living room, openly proclaiming he will soon be the world’s richest man, or taking them for a helicopter ride.

Such a man understandably divides opinion. Some praise him as proof that private sector entrepreneurship and the pursuit of wealth bring benefits to Brazil, and have made his book, “The X Factor“, a best-seller. Others see his bragging as very poor taste in a country still facing widespread poverty. And the financial crowd has often questioned when his companies will actually make money.

But after a rough spot, the Brazilian legal system and Arab money have stepped in to help him out, and Eike is on top again.

Links:
Why has Brazil been getting richer?
FT Beyondbrics – Batista gets a new friend from the Gulf

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Bad week for Chevron, important case for Brazil

Vincent Bevins — Mon, 19 Mar 2012 23:25:09 +0000

It’s never good news when you find out that the Brazilian government is prohibiting you from leaving the country so you can be tried for environmental crimes.

But this is about much more than just the fate of 17 unhappy executives at Chevron, the major US oil company. The project to extract oil from Brazil’s offshore “pre-salt” reserves is arguably the most important challenge this country is facing over the next decade. The future of Brazil’s economy likely depends on its success as much as anything else.

Understandably, much attention has been focused on Brazil’s preparations to host the World Cup in 2014 and the Olympic Games in 2016. But compared to the country’s oil plans, those investments are tiny.

One expert put it this way in my Los Angeles Times piece in December:

“This will be one of the largest investment projects in all of human history,” said Pedro Cordeiro, an oil expert at the Bain & Co. consultancy in Sao Paulo. “Putting a man on the moon, for example, cost 30% less in current terms than will be spent [on Brazil’s oil project] in just the next five years.”

So it was understandably a source of considerable concern when one well (though not a “pre-salt” well) sprung a leak in November, and then it seemed like operator Chevron had misrepresented the problem.

Brazil needs to find a way to efficiently extract the offshore oil deposits, while maintaining high environmental standards, but without scaring off international investors or partner companies. This is a tricky balance to strike.

Reuters today reported that the 17 employees could face charges Wednesday relating to safety standards, and cited experts that implied Brazil might be coming down too hard on Chevron, with the potential to slow down extraction plans or scare away other companies.

For example:

“We are in uncharted territory,” said Cleveland Jones, a Brazilian oil geologist at the State University of Rio de Janeiro. “Do we want better environmental standards? Yes. Did the environment get really hurt? No. If you applied the same standards to the whole industry, you’d probably have to shut it down, and we aren’t applying the same standards to others.”

and

The Chevron leak was less than 0.1 percent of BP’s massive spill and no oil reached shore, raising concern from Chevron and others that the charges may be politically motivated or unfair.

and

Much larger and more damaging spills by Brazilian state-run energy giant Petrobras, which owns 30 percent of the Frade field operated by Chevron where the leak happened, have not led to criminal charges against Petrobras or its executives.

Is all of this fair? It may be too early to tell. The Reuters documents don’t seem to be comprehensive and we haven’t seen the actual charges. For all we know, the issue is really the claim that Chevron may have lied to the government.

But one thing is certain: all of this matters very much. Like it or not, Brazil is on the path to become more of a petro-economy, and if this does not go according to plan, a lot of money will be lost. If you care about the hard numbers behind the Brazilian economy, take your eyes off the football pitch and look deep below the ocean’s surface.

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